Nokia says in talks with several parties on NSN

ArildMoen

HELSINKI (MarketWatch) -- Finland-based telecom equipment maker Nokia Corp.
NOK, +0.87%
said on Friday it was in constructive talks with several parties for a stake in its Nokia Siemens Networks joint venture with Germany's Siemens AG
SI, +1.69%

The statement comes as private equity firms Kohlberg Kravis Roberts & Co. and TPG, walked away from jointly bidding for a majority stake in NSN, a person familiar with the situation told Dow Jones Newswires. The person said the issue had been price and that the buyout duo were unlikely to return to the table. The two groups have formally withdrawn from the priocess, the person said.

The Financial Times had earlier reported that KKR and TPG were out of the running. Their withdrawal leaves only the Gores Group and Platinum Equity LLC as the remaining consortium bidding for NSN, the report said.

"As we have said earlier, there has been unsolicited interest in NSN and we continue to be in constructive talks with multiple parties," said Nokia spokesman Doug Dawson in response to the report, without naming the companies.

NSN has "real momentum and innovation, and shareholder interests are aligned in building a strong and profitable company," he said.

Siemens also confirmed that several parties remained in discussions over a stake in NSN.

None of the private equity groups was immediately available to comment. Nokia declined to comment further.

Nokia Siemens Networks spokesman Ben Roome declined to comment.

NSN faces tough competition in the network equipment segment from market leader Telefon AB LM Ericsson
ERIC, +2.38%
but also Chinese rivals such as Huawei Technologies and ZTE Corp. (0763.HK) In the first quarter, NSN, which is fully consolidated in Nokia's earnings, narrowed its operating loss to EUR142 million from EUR226 million a year earlier as sales climbed 17% to EUR3.2 billion.

NSN last year agreed to buy the bulk of Motorola Solutions Inc.'s (MSI) network equipment business. The transaction faced delays while Chinese antitrust authorities reviewed the deal, but was completed for $975 million in April this year.

Analysts at Goldman Sachs estimate NSN's 2012 earnings before interest and taxes post-Motorola will be EUR129 million, compared with a loss of EUR686 million in 2010. Based on that projected earnings figure, and assuming 30% growth in 2013, at a 20x EBIT multiple, NSN would be worth EUR4.3 billion based on a 30% take-out premium.

Nokia's management has said it doesn't consider it essential to own an network business in order to be a successful mobile phone maker.

Still, the Finnish company faces some major challenges. Nokia, although still the world's No. 1 handset maker, is struggling to compete in the high-end market, where it has been losing market share to nimbler competitors such as Apple Inc. (AAPL) and devices based on Google Inc.'s (GOOG) Android operating system. Its failure to keep pace with the fast-moving market prompted Nokia to abandon its Symbian platform for smartphones in February, in favor of a partnership with Microsoft Corp. (MSFT)and its Windows Phone software.

But with no products based on the platform due until the end of the year, concern mounting about its rapidly declining market share and downgrades from rating agencies, Nokia itself has become the subject of takeover speculation, chiefly due to its plunging market value.

Chief Executive Stephen Elop on Thursday was forced to reiterate that the company isn't for sale, saying the speculation is "completely groundless."

Nokia's Helsinki-traded shares have lost nearly 45% of their value in the past year. At 1400 GMT, its shares were up 0.56% at EUR4.32.

(Marietta Cauchi and Rosemary Okolie in London contributed to this article.)

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